Health Care Fraud and the False Claims Act

The government’s primary weapon to combat health care fraud is the False Claims Act. With recent amendments to the FCA, the government’s weapon has become even more powerful.

The FCA is used for a range of schemes, including billing for services not rendered or goods not supplied, “upcoded” services, medically unnecessary services, kickbacks, false cost reports, and illegal sales and marketing schemes. The potential recoveries are costly an the reputational damage to public companies can be even more costly.

The FCA provides for trebling of damages: each false claim can be pealied at $5500 to $11,000 per violation. Defendants can be liable for attorneys’ fees and costs to qui tam relators.

The 2009 and 2010 amendments to the FCA provided additional tools for the government, including expansion of “reverse claims liability” to include retention of an overpayment; authorizing the Justice Department to use civil investigative demands (CIDs); and expanding liability for kickbacks to include submission of a claim tainted by a kickback even if the claimant had no role in the alleged kickback scheme.

Health care companies are subject to private qui tam suits initiated by “relators” in which the government can intervene on all or some of claims and can then assert primary responsibility for prosecuting the action and is not bound by the relator’s acts or allegations. If the government declines to intervene, the relator can continue the action. The government has more than 1000 qui tam cases awaiting the government’s decision on intervention.

Companies need to pay close attention to potential FCA liability by ensuring a culture of compliance premised on effective controls. The consequences of treble damages, criminal liability and reputational damage are too significant to ignore.